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'Silicon Island' high-tech sector mired in troubles

TAIPEI -- “Silicon Island,” as Taiwan is known for its world-beating, high-tech manufacturing sector, is ailing.

To begin with, HTC, the smartphone maker that is arguably the island's best-known technology brand, has seen its revenue drop more than 30 percent this year and its market value more than halved, as a result of patent disputes with Apple in the U.S., weaker demand in Europe and fierce competition in China.

This is a far cry from the company's red-hot fortune of just a year ago when it overtook Nokia in market value and even briefly outsold Apple in the U.S. market.

Acer, another industry titan, suffered its first annual loss, amounting to NT$6.6 billion, last year on the back of weak laptop sales as consumers switched to tablets.

Taiwan's information, communications and technology exports fell 23 percent in the first seven months of the year.

Meanwhile, there is much hand-wringing and envy over the rising fortunes of South Korean rivals led by Samsung, which now leads the global market for smart phones and the Amoled display screen. South Korea is also ahead of Taiwan in the DRAM memory chip and LED markets.

Analysts agree that the island faces a double whammy of external and intrinsic problems. On the one hand, the euro crisis and China's slowdown have reduced demand; on the other, Taiwanese technology firms are not innovative enough to keep their products fresh and interesting.

“In the past, even if demand fell in Europe and the U.S., there was the mainland market. But now even China's economic growth is slipping below the crucial 8 percent mark. It has definitely affected Taiwan,” said Industrial Economics and Knowledge Center head Stephen Su.

Moreover, China is developing its own companies such as ZTE and Huawei to reduce its reliance on imports of Taiwanese electronic components and products, noted professor Wang Jiann-chuyan of Chung-hua Institution for Economic Research.

On the problem of innovation, he said: “Taiwan spends proportionately as much as developed countries on research and development, but too much of it goes into innovating components rather than product brands.”

On top of that, he added, too much of the government's NT$100 billion R&D funds go to basic research when more should be spent on applied research.

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